The constitution of trusts

A beneficiary has no enforceable interest where the trust is not properly constituted. Why? Equity will not assist a volunteer and equity will not perfect an imperfect gift.

Methods of constitution- 

There are two methods by which a settlor can perfectly constitute a trust-

1) self declaration: the settlor declares himself trustee of his own property.

2) declaration and transfer: the settlor transfers legal title to the property to a third party.

Milroy v Lord 1862- seminal case- 'a settlor may constitute a trust if he transfers the property to a trustee for the purposes of the settlement, or he declares that he himself holds it on trust for those purposes, but in order to render the settlement binding one of those modes must be resorted to for there is no equity in this court to perfect an imperfect gift.'

Richards v Delbridge 1874- 'he may either do such acts as amounts in law to a conveyance or assignment of the property, and thus completely divest himself of legal ownership, or the legal owner of the property may constitute himself a trustee and, without an actual transfer...

of the legal title, may so deal with the property as to deprive himself of beneficial ownership and declare that he hold it from that time forward on trust for the other person.' 

Declaration of trust- Richards v Delbridge 1874- 'the settlor need not use the words 'I declare myself trustee' but he must do something that is equivalent to it and use expressions which have meaning, for however anxious the court may be to carry out a mans intention, it is not at liberty to construe the words other than according to their proper meaning.' 

Re Cozens 1913- 'in each case where a declaration of trust is relied on the Court must be satisfied that a present irrevocable declaration of trust has been made.'

Jones v Lock 1865- no trust as 'loose conversation' ineffective. Gift, not trust intention.

Paul v Constance 1977- dont need word trust.

T Choithram v Pagarani 2001.

Shah v Shah 2010- 'in interpreting a document, the court should not have regard to the subjective intention of its maker, but to the intention of the maker as manifested by the...

words he has used in the context of all the relevant facts.' 

Transfer of legal title- 

Land- deed (LPA 1925) and registration (LRA 2002)

Shares- execute share transfer form and registration (Stock Transfer Act s1 or CREST system). Milroy v Lord- mere delivery was not enough. Needed to have registered. 

Chattels- deed of gift (rare) or physical delivery and intention to transfer Re Cole 1964. 

Ineffective transfer and the 'every effort rule'-

• Milroy v Lord 
• Richards v Delbridge 1874
• Zeital v Kaye 2010- 'once the donor has done all in his power to transfer the shares, he will be regarded as holding the legal title to them upon trust for the donee, who will thereupon become their beneficial owner.' 

words he has used in the context of all the relevant facts.' 

Transfer of legal title- 

Land- deed (LPA 1925) and registration (LRA 2002)

Shares- execute share transfer form and registration (Stock Transfer Act s1 or CREST system). Milroy v Lord- mere delivery was not enough. Needed to have registered. 

Chattels- deed of gift (rare) or physical delivery and intention to transfer Re Cole 1964. 

Ineffective transfer and the 'every effort rule'-

• Milroy v Lord 
• Richards v Delbridge 1874
• Zeital v Kaye 2010- 'once the donor has done all in his power to transfer the shares, he will be regarded as holding the legal title to them upon trust for the donee, who will thereupon become their beneficial owner.' 

• Curtis v Pullbrook 2011- 'I reach that conclusion to deny the transfer without any great comfort that the existing rules about the circumstances in which equity will and will not perfect an apparently imperfect gift of shares serve any clearly identifiable or rational policy objective.' 
• Re Fry 1946- 'now I should have thought it was difficult to say that the testator had done everything that was required to be done by him at the time of his death, for it was necessary for him to obtain permission from the Treasury for the assignment and he had not obtained it. Morever the Treasury might in any case have required further information of the kind referred to in the questionaire which was submitted to him, or answers supplemental to those which he had given in reply to it.' 
• Re Rose 1952- 'The deceased had done all in his power to divest himself of and to transfer to the transferees the whole of his right, title and interest, legal and equitable, in the shares in question. He had complied strictly with the procedure prescribed by the company's articles. Nevertheless he had not conferred the full legal title, nor could he do so by the unaided operation of any instrument of his, for under its articles the company was only bound to recognise the registered holder of a share, and none other, as the absolute owner of the share. the deceased had thus done all he could, in appropriate form to transfer his interest...

• but so far as the legal title was concerned, it was not in his power himself to effect the actual transfer as it could only be conferred on the transferees in its perfect form by registration of the transfers. But he had, in my judgement, transferred to the transferees the right to be placed on the register in his stead as the owner of the shares, subject to the directors power to refuse registration.' 
• Mascall v Mascall 1985
• Pennington v Waine 2002- 'The equitable assignment clearly occurs at some stage before the shares are registered. But does it occur when the share transfer is executed or when the share transfer is delivered to the transferee or when the transfer is lodged for registration, or when the preemption procedure is satisfied or the directors resolve that the transfer should be registered.''There can be no list of comprehensive factors which makes it unconscionable for the donor to change his or her mind: it must depend on the courts evaluation of all the relevant considerations.'- Arden. 
  • 5 factors may be that- free will, signs form and delivers, told H about the gift, P said no action needed and H signed the form.
• Shah v Shah 2010

The rule in Strong v Bird- fortuitous as equity is unconcered with how you get the legal title. Where the trust is constituted through co-incidental receipt of trust property by the intended trustee.

• Strong v Bird 1874- 'it appears to me that there being a continuing intention to give, and there being a legal act which transferred the ownership and released the obligation- for it is the same thing- the transaction is perfected, and he does not want the aid of a court of equity to carry it out, or make it complete, because it is complete already, and there is no equity against him to take the propery away from him.' 
• Re Stewart 1908- 'the vesting of the property in the executor at the testators death completes the imperfect gift made in the lifetime, and the intention of the testator to give the beneficial interest to the executor is sufficient to countervail the equity of beneficiaries under the will, the testator having vested the legal estate in the executor.' 
  
• Re Ralli's Will Trusts 1964- no deliberate transfer of property is needed- 'in my judgement the circumstance that the plaintiff holds the fund because he was appointed trustee of the will is irrelevant. He is at law the owner of the fund, and the means by which he became so has no effect on the quality of his legal ownership. The question is: for whom, if anyone, does he hold the fund in equity?' 
  

Donationes mortis causa- 'deathbed gifts'- 

• Re Beaumont 1902- 'a DMC is a singular form of gift. It may be said to be of an amphibious nature being a gift which is neither entirely intervivos nor testamentary. It is an act inter vivos by which the donee is to have the absolute title to the subject of the gift not at once but if the donor dies. If the donor dies the title becomes absolute... as against the executor. In order to make the gift valid it must be made so as to take complete effect on the donors death.' 
• Cain v Moon 1896- 1) the gift or donation must be made in contemplation, though not necessarily in expectation of death 2) the gift must be made under such circumstances as to show the property is to revert to the donor if death does not occur (ie it is conditional on the death of the donor) and 3) there must have been delivery to the donee of the subject matter of the gift. The onus of proof is on the donee. 
• Sen v Headley 1991
• Cosnahan v Grice 1862- 'cases of this kind demand the strictest scruitiny. So many opportunities and such strong temptations, present themselves to unscrupulous persons to pretend these death bed donations, that there is always a danger of having an entirely fabricated case set up. And without any imputation a fraudulent contrivance, it is so easy...

to mistake the meaning of a person languishing in a mortal illness, and by a slight change of words, to convert their expressions of intended benefit into an actual gift of property, that no case of this description ought to prevail, unless it is supported by evidence of the clearest and most unequivocal character.'

• Duffield v Elwes 1827- 'the concieved approach of death'
• Re Cravens Estate 1937- 'death within the near future.'
• Wilkes v Arlington 1931- had cancer but died of pnemonia- doesnt have to come from anticipated source.
• Gardener v Parker 1818- context matters- inferred as man was terminally ill when he made the gift.
• Re Kirkley- the donor was just old, not ill so wasnt a DMC. 
• Staniland v Willot 1850
• Tate v Hilbert 1793